Question 23 (4 points) E (ijListe-n b l You possess Prospect Theory preferences. You and your colleague have been competing against each other to see who has better stock picking abilities. Both of you began with investing 85.000 in stocks in January 2017. It is now April 2017. The value of your portfolios at the end of the month over the past three months is as follows Your Colleague's Portfolio Portfolio 85,000 $51000 $10~000 815,000 89-000 $6000 a) Assume that you take your colleague's portfolio value to be your reference point. Write down each month and the gain relative to the reference point for that month, (I am looking for three numbers. Indicate losses with a negative number). (1 mark) b] Explain whether you would behave like a risk-averse or risk-loving investor in February (1 mark) and March ( 1 mark}. c) Give an example of how a risk- averse investor would trade. (1 mark) / \\ Question 24 (3 points) E (thisten } l Consider the following GARCH{1.1) model for variance: of : 0. 001 + 0.75011 + 0.021%2 a) Why do finance professional model volatilities as being time-varying? (1 mark) b] The coefficient on 0-31 is much greater than the coefficient on T3. What does this tell us about how volatility changes overtime? (1 mark) c) What is the long-term (or unconditional) variance associated with this model? (1 mark}